Day of shame for RBS: Bank slapped with £390m fine after 21 staff revealed to be embroiled in Libor rate-fixing

A humiliated Royal Bank of Scotland has been slapped with fines totalling £390million for rigging interest rates.

A probe by regulators has exposed a conspiracy to manipulate Libor rates involving 21 people and spanning the UK, Japan, Singapore and the US. The wrongdoing went on from October 2006 to as recently as November 2010.

Along with details of the penalties, US and UK authorities also published damning messages between RBS traders revealing how they went about fixing Libor - which is used to set mortgage repayments for millions of households.

Rating fixing: Involvement of British taxpayer-owned RBS in the scandal is particularly toxic

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Under its settlement, RBS has also agreed a deferred prosecution agreement with the US Department of Justice (DoJ) - a deal that could see it face tough sanctions if it commits any form of criminal offence during the period - while its Japanese arm has pleaded guilty to other instances of financial fraud.

In September it emerged that senior traders at RBS allegedly boasted of running a ‘cartel’ in London to fiddle rates just months before it received a £45bn bailout from taxpayers in 2008.

WHAT DOES RBS HAVE TO PAY IN FINES?

The RBS fine dwarfs the £290million handed out to Barclays last summer, when it became the first bank to be punished over the scandal.

The lurid emails released today echo those of Barclays traders, which also bragged of manipulating Libor rates.

RBS is one of about 20 banks which are being investigated over involvement in manipulating the rate, which governs the price of more than $500trillion-worth of loans and transactions around the world, including household mortgages.

Swiss bank UBS has so far been hit with the biggest penalty, agreeing a near £1billion settlement with regulators in December. One of the former UBS traders who is alleged to have been involved in Libor fixing - Tom Hayes - is accused by the DoJ of colluding with counterparts at RBS.

The involvement of RBS, which is majority-owned by British taxpayers, in the scandal is particularly toxic.

The Financial Services Authority, which has fined RBS £87.5million, said today that misconduct at the bank had been widespread.

'At least 219 requests for inappropriate submissions were documented – an unquantifiable number of oral requests, which by their nature would not be documented, were also made,' it said.

'At least 21 individuals including derivatives and money market traders and at least one manager were involved in the inappropriate conduct.'

Tracey McDermott, director of enforcement and financial crime at the FSA, said the extent and nature of the misconduct cast a shadow on the reputation of the industry.

It is believed Hourican is being sacrificed in a bid to satisfy pressure from regulators and the Government for a senior scalp.

Controversial: Supporters of John Hourican believe he is being made a scapegoat for the scandal

He is already a controversial figure at the bank having pocketed huge bonuses while being charged with cutting thousands of jobs as he winds down the investment bank. But his supporters believe he is being made the scapegoat for the scandal.

Hourican has been at RBS for 16 years but only took the helm of the investment bank in October 2008, after the worst of the Libor misdeeds.

There is no evidence that he was personally complicit in the scandal. However, there may be questions over how quickly Libor problems were identified and dealt with.

RBS chief executive Stephen Hester said following the announcement of Libor penalties: 'I want to speak very clearly and on behalf of the 137,000 employees of RBS. We condemn the behaviour of the individuals who sought to influence some Libor currency settings at our bank from 2006-10. There is no place at RBS for such behaviour.'

RBS chairman Philip Hampton said: 'The RBS board acknowledges that there were serious shortcomings in our systems and controls and also in the integrity of a small group of our employees.

'This is a sad day for RBS, but also an important one in continuing to put right the mistakes of the past.'

He said the board had 'used all means possible to ensure the gravity of this issue is reflected in the remuneration received by employees'.

In a statement to the House of Commons, Financial Secretary to the Treasury Greg Clark said the manipulation of Libor was 'motivated by greed' and the findings against RBS were 'grave'.

It was 'right' for Hourican to leave his post and forfeit bonuses, said the minister.

Stephen Hester: 'There is no place at RBS for such behaviour'

Clark told the Commons: 'This is another day of shame for Britain's banks, and it is vital that we recognise it as such, not because Britain stands alone in this and similar scandals - which, as we know, is far from being the case - but because Britain must stand out in the way we put things right.'

The Commodity Futures Trading Commission in the US said RBS had failed to enforce any 'meaningful' controls surrounding Libor submissions until June 2011.

'During this time, RBS was experiencing significant growth on its yen and Swiss franc trading desks, generating revenues for RBS that were multiplying over the years,' it said.

The US Department of Justice said it was holding RBS accountable for a 'stunning abuse of trust'.

DoJ assistant attorney General Breuer said: 'These are extraordinary results, and our investigation is far from finished. Our message is clear: no financial institution is above the law.'

Shares in RBS were up 2.45p at 339.95p in early afternoon trading.

RBS said the 21 staff involved in attempting to manipulate interbank lending rates - specifically Japanese Yen and Swiss Franc Libor submissions - have left or been subject to disciplinary action and two managers with supervisory responsibilities have stepped down.

Six staff have been dismissed, including two managers, while six have been severely disciplined or are going through a disciplinary process.

Another eight left the organisation before disciplinary action could be taken and one was dismissed for misconduct not related to these findings, added RBS.

All staff that have left the bank as a result of the investigation received no bonus for 2012 and saw full claw-back of any outstanding past awards.

HOW DID RBS STAFF FIX LIBOR?

The FSA published the following exchanges between RBS staff during the period when Libor manipulation was taking place:

Derivatives Trader C toldDerivatives Trader B (who was acting as a Substitute Submitter) that hethought that 3m JPY would only go down 1 basis point. Derivatives Trader Bresponded, “Oh no, not if I have anything to do with it, and I do havesomething to do with it! Lol.”

Derivatives Trader Binformed Broker A, “Next time I don’t want to do it on the SwapsWire.” Hefurther stated, “I’ve got to book SwapsWires within ten minutes of someoneelse booking” and then went on, “I’m now going to get into all sorts of thingsabout what happened.” Derivatives Trader B explained the situation further:Derivatives Trader B: …it’s going to be highlighted as two identical trades [going inand out of SwapsWire].Broker A: Oh, right. F***.Derivatives Trader B: So now they’re going to say, ‘Why have we got… [Panel Bank1] in and out on SwapsWire and not booked it?’ So now thewhole bank’s going to see the trade.Broker A: Yeah, s***. I don’t…there’s no way we can get this out and putback in again is there…Derivatives Trader B: I’m gonna…I’m going…I’m going to book mine not asSwapsWire.Broker A: Okay. So it’s not going to matter on mine, is it?Derivatives Trader B: I don’t…I’ve got no idea, mate. This will be a f****** disasternow.Broker A: Oh f***. Okay